On Tuesday, January 21, 2014, Governor Chris Christie signed New Jersey Senate Bill S-2018 into law known in some circles as the NJ Tenant Legal Equality Fee Bill  Under this new law, residential tenants will be allowed to recover attorney’s fees and expenses as a result of a “tenant’s successful defense of any action or summary proceeding filed by the landlord against a tenant, arising out of an alleged failure of the tenant to perform any agreement in the lease, or as the result of any successful action or summary proceeding filed by the tenant against a landlord, arising out of an alleged failure of the landlord to perform any agreement in the lease.”

The new law states that a tenant’s right to recovery is to the same extent as a landlord’s ability to recover such fees and expenses (click here for a copy).

Typically, each party to a lawsuit is responsible for his or her own attorney’s fees, unless a contract exists that provides otherwise. Most residential lease agreements require tenants to pay attorney’s fees when the owner prevails. In order to achieve alleged parity between a landlord and tenant, the new law was enacted. Under the new statute, residential tenants can recover attorney’s fees and expenses when they prevail in court, as long as the lease agreement provides owners the right to seek such fees and expenses.

Under the new law, attorney’s fees will be provided to the prevailing party regardless of language in the lease limiting the right to one party.

If the lease contains a clause awarding attorney’s fees and expenses, a prevailing tenant may be awarded attorney’s fees and expenses even if the lease only discusses an award of attorney’s fees to the landlord.

The new law would also apply even if the landlord does not seek to collect attorney’s fees in the action.

The statute applies to summary dispossess actions and any other actions between the parties, including any action arising out of the failure of the landlord to perform any covenant or agreement in the lease. The new law further provides that a tenant will not be deemed to have prevailed by satisfying a past due balance prior to entry of a judgment for possession and on the condition that the court finds that the tenant presented no meritorious defense.

The statute also limits the expenses a tenant may recover to court costs and expenses directly related to the litigation. It specifically states that personal expenses for travel, reimbursement for missed work or child care are not compensable.

If such fees and expenses are awarded to a tenant, the landlord is required to pay the tenant either as money damages or a credit against future rent, as determined by the tenant. Any waiver of the statute is deemed to be against public policy. The new law takes effect immediately and applies to lease agreements currently in effect.

For new lease agreements executed on or after February 1, 2014, a residential lease agreement that contains a provision allowing a landlord to recover attorney’s fees and expenses must also contain, in bold typeface in a font size no less than one point larger than the point size of the rest of the lease clause or 11 points, whichever is larger, the following language:

IF THE TENANT IS SUCCESSFUL IN ANY ACTION OR SUMMARY PROCEEDING ARISING OUT OF THIS LEASE, THE TENANT SHALL RECOVER ATTORNEY’S FEES OR EXPENSES OR BOTH FROM THE LANDLORD TO THE SAME EXTENT THE LANDLORD IS ENTITLED TO RECOVER ATTORNEY’S FEES OR EXPENSES, OR BOTH AS PROVIDED IN THE LEASE.

While in theory the rights of the tenant and landlord to recover attorney’s fees are reciprocal and balanced, in reality landlords typically have more assets than tenants – an award against a landlord is usually far more solvent and collectable than an award against a tenant. An attorney’s fee award against a landlord is probably fully recoverable, while an attorney’s fee award against a tenant may not be fully collectable.

Owners may consider the following (but please consult your lawyer):

• Owners may choose not to have a clause in the lease which provides for an award of attorney’s fees and expenses.
• Impose a limit on attorney’s fees and expenses. Imposing such a cap would be designed to prevent a tenant’s attorney from recovering large amounts under this new statute if a tenant prevails in a lawsuit.  The impact of such a cap is unknown.  Even so, an attorney’s fee cap may not limit an attorney’s fee award in all cases.  If a limitation is imposed, it may only limit an attorney’s fee award based on the lease provision. However, there are other state and federal laws that allow a tenant to recover attorney’s fees against landlords. The attorney’s fee cap may not limit an award of attorney’s fees granted under those other statutes.